Another Employer-Mandate Delay: Political Protection, Charged to the Deficit

By Patrick Brennan —
February 10, 2014

The Treasury Department announced a new change to the president’s health-care law today: The “employer mandate,” the requirement that all businesses with 50 or more employees offer affordable health insurance to workers clocking more than 30 hours a week, was scheduled to be implemented in 2014, along with the rest of the law. Then last July, it was delayed until 2015.

Now, it also won’t be enforced, by collecting a penalty of $2,000 per full-time worker, in 2015 for businesses employing between 50 and 99 people. That year, businesses employing more than 100 workers will have to comply, but by only providing coverage to 70 percent of their full-time workforce. In 2016, all businesses with 50 or more workers will have to cover 95 percent of their full-time workforce (the law suggests every employee has to be covered, but the IRS decided from the beginning of the rulemaking process that there should be a margin of error, hence 95 percent).

So what effect will this delay have? Not huge: It will add several billion dollars to the deficit, but have little effect on the number of Americans who actually get health insurance or on the underlying mechanics of the law. The employer mandate just wasn’t expected to have much of an effect. The delay will, however, reduce the risk of bad headlines about Obamacare over the next six months or so, helping to shield Democrats in their 2014 election battles.

How? It puts off the possible wave of firms’ cutting hours to avoid paying penalties on employees to whom they don’t want to offer health insurance, and the potential effect those penalties will have on compensation. There are also a few narrow categories, such as adjunct faculty members, that are now exempt from the mandate that hadn’t been, which won’t have a big effect on the law or insurance coverage, but can also help avoid a few bad headlines.

There was some evidence that the “part-time America” phenomenon was beginning last year, but hardly dispositive stuff. Jobs reports, especially when they get sliced down to the number of Americans working a certain number of hours (or certain industries, for that matter), can be pretty unreliable, so the flurry of argument that a couple months of strong part-time-jobs growth and weak full-time-jobs growth meant the employer mandate was seriously shifting the labor market was probably misplaced. There’s been no evidence over the past six months or so that more Americans are being hired in part-time jobs than full-time ones, which would never have been the right evidence of the employer mandate’s effect anyway. (More careful analysis of underlying work-week trends, which Jed Graham of Investor’s Business Dailyhas done a lot of, does show that low-wage workers are getting fewer and fewer hours — so the trend could slowly be taking hold, but we just don’t know for sure.)

But the “part-time America” headlines may well have just been ahead of their time, and now we’ll see next year — after Democrats have waged their 2014 battles. And it needn’t actually happen to present a problem for Democrats: Delaying the mandate helps lessen the chance that “Obamacare pushed me to part-time” headlines will start cropping up, that the data will actually support the idea that there’s a trend, and as a second-order matter, that policy analysts will be confident attributing such a trend to the law rather than other factors.

What exactly will the costs of the delay be? Last summer, the CBO modeled the one-year delay of the individual mandate that the Obama administration announced in July, and found that it will increase the deficit by $12 billion over the next ten years (almost entirely because no employers will have to pay the law’s substantial penalties, and reduce the number of Americans with health insurance (almost entirely among those who get it from their employers) by 1 million.

That finding reflects the main effect of the employer mandate: It’s a revenue-raising measure that falls on employers that don’t offer health coverage (and their employees), rather than a useful way to ensure more Americans get health-care coverage. It’s a not-insubstantial source of funding: It was scheduled, before any of these delays, to raise $140 billion between 2014 and 2023, about 7 to 8 percent of the costs of the ACA’s insurance expansion over that time.

The Urban Institute also found, when analyzing the law around the same time the CBO did, that eliminating the employer mandate would barely affect the number of Americans who get coverage because of the ACA: Delaying the mandate, they predicted, means just 300,000 fewer Americans with health insurance than if the law had been implemented in full and as written.